India's coal crisis: Why is India facing power shortage? What counter-steps are taken?

As global economy recovers from the COVID-pandemic shock, another crisis is looming - power shortage due to coal shortage, rising fuel prices, uptake in demand. While China has already begun powercuts across the nation to deal with increased demand and coal shortages, European nations have pushed up gas prices more than 130% since the beginning of September. India - one of the worst-hit by the coal shortage has 135 coal-fired thermal power plants of which 65 have only 2-3 days of coal supply.

Why is India facing a coal shortage?

While global supply chain has been hit by shipping delays leading to delays in fuel transport and subsequent coal shortages in respective nations, India has been severely hit by this crisis for multiple reasons. Incidentally, 70% of India's power demand is being met by coal-fired power plants. But, govt holds a monopoly on coal as its PSU - Coal India Ltd - is India's sole coal manufacturer.
 
Centre's core management team (CMT) comprising of representatives from MOP, CEA, POSOCO, Railways and Coal India Limited (CIL) cited the following reasons:

• Heavy rains in coal mine areas like Gujarat, Punjab, Rajasthan, Delhi and Tamil Nadu
• Increase in prices of imported coal to from $60/ton in March-2021 to $160/ton (in Sept /Oct, 2021)
• Inadequate coal stocks built before monsoon season
• 43.6% reduction in power generation from imported coal which led to extra demand of 17.4 MT of domestic coal 
• Increase in power demand from 106.6 BU per month in 2019 to 124.2 BU per month in 2021. 
• Other issues like payments dues by some coal mining companies, fall in coal imports by 40%, climate change

What is the impact?

Several state CMs - Arvind Kejriwal (Delhi), Jagan Mohan Reddy (Andhra Pradesh), Charanjit Singh Channi (Punjab) have written to PM Modi seeking his intervention to deal with a three-fold increase in the electricity charges, coal shortage and 15% power demand. 

• Punjab has imposed rotational load shedding and running coal plants reduced capacity to meet the 9000 MW demand.
• Delhi which has 6 power plants to meet its 3000 MW demand is facing reduced power generation due to coal shortage crisis for the third month. “If the situation continues, it would severely impact the power supply situation in Delhi,” Delhi CM Kejriwal told PM Modi also seeking a curb on the maximum rate of power sold through exchange.
• Rajasthan has begun a daily one-hour power cut in 10 major cities
• Andhra Pradesh has been pushed to unscheduled power cuts as generation plants have 1-2 days of coal supply to meet demand of 185-190 million units per day.
• Other states like Jharkhand, Odisha and Bihar - India's mine reserves are under severe stress as coal stocks are depleting, leading to power cuts and loss of operations in industries.

How is Centre dealing with it?

Issuing guidelines for optimal fuel usage in thermal power plants, Centre has assured that the condition would be 'alright' in the next three to four days. 

• Centre has allowed generating companies to sell unrequisitioned power in the power exchange if the purchaser does not purchase power from the power plant up to 24 hours prior to the day of delivery of power.
• CIL's coal output has reached 1.501 MT on 7 October reducing the gap between consumption and actual supply. Ministry of Coal is aiming to increase dispatch to power sector to 1.6 MT per day in next three days and thereafter try to touch 1.7 MT per day.

What are the long-term reforms?

To end CIL's monopoly on India's coal manufacturing, Centre has rolled out its mining reforms which include:

• Revenue sharing mechanism instead of regime of fixed rupee/tonne
• Entry norms to be liberalised with  nearly 50 blocks to be offered immediately
• Rs 50,000 crore to be provided to be given for diversified ops including evacuation of Coal India Ltd's coal, Rs 18,000 crore worth investment in mechanised transfer of coal
• Coal gasification/liquefication to be incentivised through rebate in revenue share
• Joint auction of Bauxite & coal mineral blocks to enhance Aluminium industry, which will reduce the electricity cost of Aluminium industry.
• Distinction between captive and non-captive mines removed, allowing transfer of mineral leases and sale of surplus unused minerals.